FILE: This Sept. 19, 2011 photo, shows a home with a real estate sign in front, in Newton, Mass. “Fiscal cliff” dispute in Washington has threatened to give underwater borrowers more reason to worry about their financial fate. (Steven Senne/AP)

Patrick Boris, a banquet chef in Las Vegas, is inching closer to his own “fiscal cliff,” 2,100 miles away from the political brinkmanship underway on Capitol Hill. If Congress and the White House allow the country to go over the cliff at the end of this month, Boris figures he might owe federal income taxes on more than $100,000 in forgiven mortgage debt following the short sale of his two-bedroom townhome next year — a personal financial “disaster,” in his words.

In Sacramento, Elizabeth Weintraub, a real estate broker who specializes in short sales, says many of her clients have potentially taxable exposures next year on $200,000 or more in negative equity balances on their short sales if Congress fails to act.

In the Tampa Bay area, Pam Marron, a mortgage loan officer who works with underwater homeowners seeking to avoid foreclosure, says some clients are in panic mode, terrified that Congress might force them into massive federal tax bills after their short sales. “This is ludicrous,” she says. “These people already are on the losing end. Now it could get much worse.”

Across the country, fears such as these are mounting. With the outcome of negotiations over taxes, spending and the federal debt uncertain, huge numbers of underwater owners worry that a single legislative provision that has been sucked into the “fiscal cliff” vortex could devastate them personally.

The issue is the extension of the Mortgage Forgiveness Debt Relief Act, which is set to expire Dec. 31. Dating to 2007, the law temporarily amended the federal tax code to allow mortgage debt on a principal home that is canceled by a lender through a loan modification, short sale or foreclosure to escape taxation as ordinary income. Several bills have been introduced in the House to extend the law for at least another year, and the Senate Finance Committee passed a bipartisan bill this summer that would do the same. But mortgage debt forgiveness is now on hold in both chambers, effectively a hostage until Congress works out a grand bargain — if it ever does.

Though it’s a relatively small and noncontroversial item compared with the multitrillion-dollar debates over taxes and spending, what’s striking about the mortgage debt relief provision is it potentially affects such a large group of owners and could be extremely painful.

Consider this:

●Nationwide, according to mortgage industry estimates, about 11 million owners are underwater. New data generated for this column by realty information company Zillow indicates the average negative equity amounts of owners who are underwater — loan balances exceed the property’s value — are higher than $90,000 in more than 64 local markets and more than $50,000 in 470. The average negative equity balance among such owners nationwide, according to Zillow, is $73,163.

The highest average negative equity among owners who are underwater is in Key West, Fla., where it exceeds $185,600. In San Francisco, it’s $153,194; Los Angeles, $134,400; New York, $126,500; Northern Virginia, $114,000; Miami-Fort Lauderdale, $99,900; Las Vegas, $99,000; and Seattle, $91,000, to name just a few.

●Federally regulated Fannie Mae and Freddie Mac own about 4 million mortgages that are underwater; as of Nov. 1, they began encouraging owners who are current on their payments but facing a financial hardship to apply for short sales that forgive their outstanding loan balances. All participants in these short sales who close after Jan. 1 might be subject to federal taxation on the forgiven balances if Congress does not extend the law.

●Forty-one state attorneys general recently appealed to the House and Senate to pass an extension so as not to disrupt the $25 billion nationwide “robo-signing” settlement they negotiated with five major lenders. Among other provisions, the settlement encourages lenders to forgive billions of dollars in mortgage debt next year and beyond. Failure to renew the law, Nevada Attorney General Catherine Cortez Masto said, would cause families who already are facing financial distress to be “stuck with an unexpected tax bill” that could deter them from “participating in this historic settlement.”

What’s the outlook? There are no indications that either House Speaker John Boehner (R-Ohio) or Senate Majority Leader Harry Reid (D-Nev.) plan a separate vote on mortgage debt forgiveness extension, essentially freeing it from the game of political chicken that’s underway. Whether a grand bargain including an extension can be struck before the New Year’s witching hour is anyone’s guess — and underwater short sellers’ ongoing nightmare.

Ken Harney’s e-mail address is